Word: bucketshop
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...Sells What It Does Not Own The many failures of stock brokerage firms in recent years has brought to the fore the old problem of driving the "bucketshops" out of business. Before headway can be made the public must know exactly what a bucketshop is. Legitimate brokerage houses should not, of course, be driven out of existence in prosecuting the bucketshops...
...while if the. price of Steel falls to 95, the broker pretends to "sell the stock out," to avoid loss himself; actually he has already sold it, and thus simply pockets the customer's $500. Most people who speculate, and particularly amateurs, are always buyers. Hence the bucketshops can flourish only when the stock market is declining. During the long decline in the stock market from November, 1919, to August, 1921, bueketshops posing as brokerage houses in Wall Street made huge sums of money. But the business becomes immediately unprofitable on a rising stock market. That...
There is a law in New York State which compels a stock broker to give, on his customer's demand, the name of the other party from whom or to whom the customer's stock was bought or sold. For this reason the bucketshops, which originally never bought or sold anything at all, must legitimately purchase for their customers, and this they almost always do. But the deception which they practice consists in at once selling the same amount of the same stock at as near the same price as possible, for some "dummy" or imaginary account...